It is an externally powered, chain driven, single-barrel weapon which may be fired in semi-automatic or automatic modes. It is fed by a metallic link belt and has dual-feed capability. The term "chain gun" derives from the use of a roller chain that drives the bolt back and forth.

The gun can destroy lightly armored vehicles and aerial targets (such as helicopters and slow-flying aircraft). It can also suppress enemy positions such as exposed troops, dug-in positions, and occupied built-up areas. The standard rate of fire is 200 rounds per minute. The weapon has an effective range of 3,000 meters, depending on the type of ammunition used.

The weapon was designed and originally manufactured by McDonnell Douglas (later acquired by the Boeing Corporation); however it is now produced by Alliant Techsystems (ATK) of Mesa, Arizona.

During the testing phase the Army eventually rejected the XM701 and started work on a newer design known as the XM723. Soon after the XM800 was also rejected. This led to the combination of the two programs, moving the scout role to the cavalry version of the XM723.

At the same time, the M139 proved to be disappointing and a contract for a new weapon to replace it started in 1972 at Hughes Aircraft as the Vehicle Rapid-Fire Weapons System-Successor, or VRFWS-S. This was essentially a power-driven gun firing similar ammunition as the HS.820, the power driven mechanism would ensure operation even in the case of a misfire.

Progress on the VRFWS-S was slow, and eventually resulted in a switch to a much more powerful 25 mm round. Similar delays in the MICV program meant the ultimate vehicles descending from their efforts, the M2/M3 Bradley Fighting Vehicle, did not enter production until 1981, by which point the Bushmaster had matured. Since 1990, there have been several enhancements made upon the weapon, resulting in the Enhanced 25 mm gun.

To date, more than 10,000 weapons are in service. One of the major reasons for this popularity is the extremely reliable nature of the weapon. It has a rating of 22,000 mean rounds between failure (MRBF), much higher than many comparable devices.

Unlike most automatic firearms, the M242 does not depend on gas or recoil to actuate its firing system. Instead, it uses a 1.0 hp (750 W) DC motor, positioned in the receiver to drive the chain and dual-feed system. This system uses sprockets and extractor grooves to feed, load, fire, extract, and eject rounds. A system of clutches provides for an alternate sprocket to engage and thus allows the gunner to switch between armor piercing and high explosive rounds.

The weapon assembly consists of three parts: the barrel assembly, the feeder assembly, and the receiver assembly. The three-part structure makes it possible for a single person to install or remove the system despite its considerable total weight.

A wide range of ammunition has been developed for this weapon, providing it with the capability to defeat the majority of armored vehicles it is likely to encounter, up to and including some tanks. The ammunition used in the M242 may also be used in a variety of weapons such as the French Giat M811, the GAU-12, or the Oerlikon KBA weapon system. It has the capability to fire U.S. manufactured ammunition as well as the NATO equivalents thereof. Primarily though, it fires six types of rounds: the M791, M792, M793, M910, MK210, and M919.

The TP-T cartridge is a fixed-type, percussion-primed training round that matches the High Explosive Incendiary with Tracer (HEI-T MK210) round ballistically. The TP-T's tracer is visible out to 2,000 meters, however, the round has a maximum effective range (accuracy-limited) of 1,600 meters.

The APFSDS-T round penetrates light armored vehicles, self-propelled artillery, and aerial targets, which includes helicopters and slow-moving fixed-wing aircraft. It is identical to the M791 Armor Piercing Discarding Sabot with Tracer except in its quality of being fin-stabilized, and that the dart is made of depleted uranium.

Work on an upgraded weapon began in 1990. In doing so, three major systems and seven minor systems were improved. The modifications began with introducing a chrome-lined barrel, an enhanced feeder, and an enhanced receiver. The weapon systems also received minor upgrades such as quick-detachable link covers, a larger breech assembly, a high efficiency muzzle brake, longer recoil, an integral round counter, an extended life firing pin and spring, and a triple-spring drive clutch. It was first put to use on the M2A3 Bradley, the third version of the M2 Infantry Fighting Vehicle.

The M242 is not used on aircraft. The AC-130U and the AV-8 Harrier II use a different 25 mm weapon, the 5-barrel GAU-12/U. The sister weapon of the M242, the M230 30 mm chain gun, is standard equipment on the AH-64 Apache attack helicopter.

In 1977 the U. S. Navy realized that it needed a replacement for the Oerlikon/Hispano-Suiza 20mm Mk 16 series of guns. In 1986 this need was satisfied with the introduction of the Mk 38 Mod 0 weapons system. A derivative of the M242 system, the Mk 38 consists of the M242 chain gun and the Mk 88 Mod 0 machine gun mount. It provides ships with defensive and offensive gunfire capability for the engagement of a variety of surface targets. Designed primarily as a close-range defensive measure, it provides protection against patrol boats, floating mines, and various shore-based targets. The US Navy also developed a high ROF variant under the designation Mk 46 Mod 0. Recently, several US Navy platforms have been outfitted with a newer version, Mk 38 Mod 2 which is remotley operated and includes an Electronic Optical Sight, Laser Range-Finder, FLIR, and a more reliable feeding system, enhancing the weapon systems capabilities and accuracy. In 2006 the Sri Lanka Navy added M242 to its fleet of Fast Attack Craft[1]

In the Republic of Singapore Navy, stabilised M242 guns are also adapted using Israeli's Typhoon system, on remote-controlled rigid-hull vessel. These were deployed as part of coalition forces' port security efforts in Iraq as well as anti-piracy roles in the Gulf of Aden.

The M242 weapon system has both electrical and manual fire control and can be operated electrically or manually. In doing so, the gunner can choose from three rates of fire: (1) Single Shot Semi-Automatic, in which the gunner can shoot as fast as the trigger can be operated; (2) Low Rate Fully Automatic, in which the weapon fires 100 rounds a minute, plus or minus 25 rounds; and (3) High Rate Fully Automatic, in which the weapon fires 200 rounds a minute, plus or minus 25 rounds.